Section 148 of NI Act and condition for suspension of sentence: What the Supreme Court held

The Supreme Court has reiterated that Section 148 of the Negotiable Instruments Act, which empowers courts to order defaulters to deposit a sum of money during the pendency of a cheque bouncing case, has retrospective effect.

The Bench of Justices Ashok Bhushan and MR Shah also held that when suspension of sentence is granted by a trial court on a condition, non-compliance of the condition will result in the vacation of the suspension.

The appellants before the Supreme Court were partners of an infrastructure company, GLM Infratech Pvt Ltd. When one of the partners (the respondent) retired, the company had issued cheques to him towards the payment of retirement dues.

When the respondent tried drawing one of the cheques in March 2014, the same was dishonoured. Similarly, 63 other cheques issued by the appellants to the respondent were dishonoured.

The respondent then filed a case against the appellants under Section 138 of the NI Act. In October 2018, the Judicial Magistrate at Panchkula held the appellants guilty and imposed a sentence of imprisonment for two years as well as a fine equal to the amount in case, in addition to 1% of the amount towards litigation expenses.

The appellants then filed an application under Section 389 of the Code of Criminal Procedure before the Sessions Court, seeking suspension of the sentence. On December 1, 2018, the Additional Sessions Judge passed an order suspending the sentence, on the condition that the appellants deposit 25% of the compensation amount. The Sessions Court ordered that a sum of Rs. 9.4 crore be deposited by the appellants. The Court also allowed the appellants an extension of time to deposit 25% of the amount.

In the meanwhile, the appellants approached the Punjab & Haryana High Court seeking quashing the Sessions Court order of December 1. The same was dismissed by the High Court, and an SLP against this order was later rejected by the Supreme Court.

Then, in July 2019, the Additional Sessions Judge directed the appellants to surrender in the trial court within four days. Another round of litigation followed, with the appellants challenging this order before the High Court. Aggrieved by the fact that the High Court dismissed the plea, the appellants approached the Supreme Court.

Appearing for the appellants, Senior Advocate Balbir Singh argued that mere non-deposit of 25% of the amount of compensation as directed in the December 2018 order cannot result in vacation of suspension of sentence. Further, the direction to deposit 25% of the compensation as directed by the trial court could not have been made under Section 148 of the NI Act, as the provision came into force after the complaint in the present case was filed.

After hearing both parties, the Supreme Court referred to its judgment of May 2019, in which it was held that the freshly inserted Section 148 of the NI Act had retrospective effect.

“This Court held that considering the Statement of Objects and Reasons of the amendment in Section 148 of the N.I. Act, on purposive interpretation of Section 148 of the N.I. Act as amended, shall be applicable in respect of the appeals against the order of conviction and sentence for the offence under Section 138 of the N.I. Act, even in a case where the criminal complaints for the offence under Section 138 of the N.I. Act were filed prior to amendment Act No.20/2018.”

On the question of suspension of sentence, the Court held,